KonquerorKMTG @KonquerorKMTG: "Macroing Out - 20/05/2024 The war..."

Italy

Edited

Macroing Out - 20/05/2024 The war develops again. Nothing new, nothing unexpected. The unexpected is never the what, but the where and the when. Who will be next in the royal rumble? Korea? Pakistan? This, I don't know. That war calls for war, that I know. So the portfolio keeps going up and I can concentrate on what's now on the sidelines and that will thrive in the next months/years. Today I will explore a few topics to expand in the future months. EU-US rate divergence The portfolio is already having huge gains thanks to $CADJPY $AUDJPY and $GBPJPY with the double-whammy of both etoro refunds and right direction of the investment. The rationale behind was relative printing needs comparing Japan to gold currencies (canada australia and new zealand are called golden currencies because they are currency of gold exporters and have relative benefits in periods where the gold rises). UK/japan was just relative printing needs having some similarities. Now EU has announced rate cuts. If this is not a bluff this could create an arbitrage in the eurodollar system: the $ magnet with high yields VS the eurobonds shedding their returns. Investment will move from € to $, favoring European exports, strenghtening the dollar, slowly creating (relative) demand for $10yUS.FUT $5yUS.FUT and $2yUS.FUT that could push the yield down. I don't think EU will shift for real but if it does Powell will have to do so after the elections (the september FED rate day is a no-no because historically the FED doesn't want to be called political and waits the elections out). Anyway my temporal horizon for the short on american bonds was september-january and it abundantly paid up until now. Let's see. Water-Sewage Water is fundamental and the use&abuse is growing. I'm eyeing out some stocks like $VIE.PA (Veolia Environnement S.A.) , $PNN.L (Pennon Group PLC) (terrible debt but nice assets), $ARTNA (Artesian Resources Corporation) , $AWK (American Water Works Co Inc) $SJW (Sjw Group) to have European and American exposure. In the deglobalizating future, you will see me invest in other continents less and less, except in the case of friendshoring issues with south america or similar. For now although very important, I'm postponing water investment because normally the stock market has a dragdown AFTER the feds cuts rates. This may seem counterintuitive but to make it quick, essentially the pivot always come when it's the last option aka when it's too late: bankrupcies were already latent, companies have saturated their credit access and when the rate cut comes like... refreshing water, it's too late for the market. Since these stocks are not hot right now, I wait like a lynx in the bushes. Copper-Silica/Glass Other key commodities for similar reason. Silica (a fancy way to call sand) is used to make glass that's used to make optic fiber. I don't care about the optic fiber you have at home, I'm thinking about the huge transoceanic internet cables that connect the internet. those are very costly to produce and to lay down and are strategic military targets. A huge one was severed in the north sea just before the Ukraine war probably by the russian, another was damaged in the red sea more recently and chinese fisher ships more often than you could think "happen" to drop their anchors right on the cables requiring immediate reparations. The companies that lie down these cable are often private because they're involved with the military and the sovereign nation themselves so having them on the stock market would not be a good idea, but one of the main ingredient for their cables is glass. For now I opened a small position in $OI (O-I Glass Inc) but I want to research more deep for other companies that could produce more sophisticated kind of glass cables. $COPPER.FUT (especially with my favourite $SCCO (Southern Copper Corp) is near in usefulness as it will be needed in huge quantities for all technologic products, military products/facilities and probably war repairs plus secondarily -but I like the detail- the self-reinforcing feedback loop: the more copper costs the more theft from electric public cables will be ravaged and stolen. AI screams for copper too,indirectly. Being a hard commodity it will also enjoy a high inflationary environment, typical of the second half of wars. I'll invest in copper sooner than water as it's already hot on wall street but I think it will be hotter... exactly as the geopolitical situation.... Book of the Month: War and Peace and War, by Peter Turchin. Probably the bible of cliodinamics.